Malta Financial Services

Malta financial services blog hosting posts on using Malta as a financial services centre for the hedge funds, investment services, insurance and banking and finance industries. Malta serves as a European domicile of choice for the set up of regulated companies in the European Union and has earnt a high place in the ranking of reputable international financial centres.

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Friday, 26 May 2017

Last month Malta’s Prime Minister revealed that cabinet has approved the first draft of a national strategy to promote blockchain. Blockchain is the technology underlying the Bitcoin crypto currency and other fintech solutions. This Malta blockchain plan has the single purpose of making Malta one of the first countries in the world to embrace blockchain. The draft shttps://www.ccmalta.com/news/malta-blockchaintrategy will soon be forwarded for public consultation.

This is welcome news that will see the creation of the world’s best environment for the development and commercialisation of Fintech models and disruptive innovation. Malta wants to make sure it has the appropriate regulatory framework, the right tax system and the best infrastructure to support this ambition.Read more at: Malta Blockchain Strategy.

Saturday, 11 March 2017

Very proud to announce that at the WealthBriefing Swiss Awards 2017, Malta was awarded the crown of 'International Finance Centre - Editor's Award'. The awards dinner was held at the Hotel President Wilson, Geneva, Switzerland.
This is yet another noteworthy milestone in the Malta's drive to be recognized as a pre-eminent player in the financial centres space.
The awards are designed to recognise companies, teams and individuals which ‘demonstrated innovation and excellence during 2016’.

Wednesday, 1 March 2017

In a debate held by CEPS Ideas Lab yesterday in Brussels, Malta’s Prime Minister Joseph Muscat put on the ‘hat’ of the European citizen “fed up of policymakers going round in circles” and decided to propose 'out of the box' ideas. Over 43 different nationalities were represented during the event and gathered to debate key European policy issues.

Representation was from national governments’ representatives, NGOs, businesses, and European institutions. Five ideas were proposed by Prime Minister Muscat and these centred around Europe should become the bitcoin continent; citizenship as an innovative policy tool; creating a European Social Pact; establishing the European Integration Brexit Fund and opening negotiations on Chapter 24 with Turkey.

From a fintech point of view, the most 'colourful' proposition was that of turning Europe into the Bitcoin Continent. This though obviously extends to the use and development of sophisticated platforms and protocols based on blockchain.

Malta’s PM declared that now is the time for Europe to embark on another 'unthinkable' project. Some financial entities are slowly accepting that blockchain, is much more efficient and transparent than the classical systems and can definitely not be discarded. He stated that even though the rise of crypto currencies can be slowed it cannot be stopped and these are here to stay.

“My point is that rather than resist, European regulators should innovate and create mechanisms in which to regulate crypto currencies, in order to harness their potential and better protect consumers, while making Europe the natural home of innovators.”

Malta Bitcoin Domicile

This innovative outlook merges very well with Malta's strategy to position itself as an innovation hub. For the last twenty years, Malta has been a forward looking destination, with an open business-centric commercial community that stands tall as an EU member state, and a proven record of economic success.

Malta has developed a clear strategy for sustainable economic development, identifying key sectors with high growth potential as well as plans to support their consolidation and success. These sectors include, but are not limited to, information and communication technology, advanced manufacturing, life sciences (including the biotechnological, pharmaceutical and chemical industries), transport and advanced logistics, tourism, international education services, financial services, and the creative industries.

Malta Blockchain Think Tank

Malta Prime Minister's comments on bitcoin are not the only initiatives the island is doing to master cryptocurrencies and new payment and transactional typologies. Other initiatives include the Malta Stock Exchange (MSE) setting up a Blockchain Think Tank consisting of members of the Exchange’s Board, its Chairman and Chief Executive and outside experts. The latter will assist in the formulation of a strategy geared towards addressing blockchain as an emerging technology.

Monday, 20 February 2017

Fitch Ratings
has affirmed Malta's Long-Term Foreign and Local Currency Issuer Default
Ratings (IDR) at 'A' with a Positive Outlook. Furthermore, the issue ratings on
Malta's senior unsecured foreign and local currency bonds have also been
affirmed at 'A' and 'F1', respectively. The Country Ceiling has been affirmed
at 'AAA' and the Short-Term Foreign and Local Currency IDRs at 'F1'.

Fitch - Key
Rating Drivers

When
commenting about Malta’s ratings, Fitch noted that these reflect the high
national income per head compared with the ‘A’ median, Malta's robust
economic growth and a large net external creditor position. The ratings are
constrained by ongoing structural bottlenecks as captured by the weak World
Bank Ease of Doing Business indicator

Fitch’s
Positive Outlook for Malta reflects the rating agency’s view that the public debt/GDP
ratio is on a downward trajectory and that economic growth will keep
outperforming similarly-rated peers.

2016 saw
Malta’s economic growth remain strong at 3.9% year-on-year over the first three
quarters which has been boosted by robust public consumption.

The rating
agency forecasted that the “Maltese economy will keep growing at a faster pace
than the 'A' median at an average 3.3% over 2017-2018, supported by strong
employment growth, rising disposable income due to continuous wage appreciation
and the launch of new investment projects in the health, education and
transport sectors.” This projected growth is in line with the forecast in the Malta Budget
2017.

Sectorial Analysis

The pharmaceutical, remote gaming, financial
services and tourism sectors
are expected to experience strong export performance this year. Despite higher
import-intensive investments related to the EU funding cycle, exportations from
the aforementioned sectors will help Malta maintain a solid current account
surplus over 2017-2018. Fitch continued to add that Malta’s external
position compares favourably with ‘A’ rated peers with a net international
investment position estimated at 47% of GDP at end 2016.

Real GDP
growth was revised up by 4.9pp in 2014 and 1.3pp in 2015, following national
accounts revisions published by the National Statistical Office in December
2016. This can be attributed to upward revisions to non-residential
construction and machinery, as well as service exports particularly from the
gaming industry. This result was a substantial improvement in the public
debt/GDP ratio and to an upward revision of potential GDP growth to 5.4% in
2016, reflecting higher estimates of total factor productivity.

Fitch has
also pointed out that high revenues from excise duties, income tax, and the Malta
International Investor Programme (IIP), have helped Malta’s gross
general government debt fall to an estimated 59% of the GDP at end-2016 from
60% in 2015. The rating agency is expecting it to further decrease to 56% in
2018, on the back of an improved primary surplus and strong nominal GDP growth,
still higher than the 'A' median of 52% of GDP.

With respect
to fiscal deficit, Fitch’s estimations fall in line with those of the Malta
Budget 2017. It is expected that fiscal deficit shall decrease to 0.5% of GDP
from an estimated 0.7% in 2016. “Robust economic growth and additional indirect
tax measures will boost tax revenues and offset more moderate revenue from the
IIP, increased expenditure related to the EU presidency and lower tax on
pensions,” adds the agency.

With respect
to the local airline, no further capital transfer has been budget for Air Malta
as the government expects private investors to take a stake in the company this
year.

Fitch
maintains a favourable outlook on the future of Malta’s deficit and believes
that it will remain stable in 2018 as higher absorption of EU funds enables
lower public investment.

Government-guaranteed
liabilities remain amongst the highest in the European Union at 14.8% of GDP at
the end of 3Q16, although they are set to decrease to 11.9% of GDP at end-2017,
when the temporary guarantee granted to ElectroGas for the construction of a
new power station expires. The rating agency also noted that most guarantees
relate to profitable companies, including the utility company Enemalta, Freeport
Group Corporation and Malta Industrial Parks.

Banking

Fitch has
also reviewed the Maltese banking
sector which continues to register substantial growth. “Malta's
banking sector remains profitable, liquid and well capitalised, albeit highly
concentrated, with core banks representing 219.5% of GDP as of end-September
2016. Asset quality has improved with non-performing loans decreasing to 5.6%
of total loans at end-September 2016, and we expect it to improve further,”
states the agency.

The agency
assumes that the government would only be predisposed towards supporting the
core domestic banks that are systematically important, particularly the Bank of
Valletta (109% of the GDP at-end 2016) while on the other hand, HSBC Bank Malta
(81% of GDP) is more likely to be supported from its parent company.

Finch rating
agency propounds that a sharp correction in the housing market constitutes the
main domestic risk to the sector through mortgage lending and real estate
collateral. However, the rise in house prices has moderated and the pace of
mortgage lending decreased to 6.2% as of end-September 2016 from 11% a year
earlier.

The rating
agency has also commented on future developments which could individually or
collectively result in positive rating. These could include:

A longer track record of
consolidating the public finances that leads to a lower government
debt/GDP ratio.

A significant decline in
contingent liabilities or a low likelihood that these contingent
liabilities materialise.

Friday, 10 February 2017

Malta is the first European jurisdiction to enact a specific Family Business Legislation. The new Family Business Act has come into force on 1st of January 2017. This piece of legislation is acknowledged as being a pioneer in the area of Family Business because of a number of reasons.

Primarily, this new law recognises a ‘family business’ in a new legal form. Malta is the first jurisdiction to specifically legislate for family business and define this business model for identification and regulation purposes. The definition is listed in Article 3 of the Act, consisting of both direct and indirect modes of ownership. Direct ownership of the family business can take the form of a listed company, a limited liability company, a registered partnership, a business set up as a trust, an unregistered partnership and any other business as the Minister may prescribe. Indirect ownership of the family business is identified in holding companies, those held in a trust and private foundations. In view of the fact that prior to this legislation, there has never been an EU harmonised, legally-binding definition of what constitutes a family business, this addition is somewhat significant.

The Family Business Act also establishes and introduces a Regulator who shall be a person appointed for a period of three years to manage, supervise and administer the Register of Family Businesses. The Regulator’s role is to assess all applicants seeking to register as a family business under the Act and ensure on-going compliance with the legislation. The spirit of the Act ensures that a regulatory framework encourages family members within the same family to transfer their family business inter vivos, as opposed to transfer causa mortis. In doing so, this mode would far likely result in the success of the continuity of the business and the law also introduces a number of benefits and assistance which help family businesses facilitate the transfer.

The benefits currently applicable for businesses upon registration as a family business are listed in Article 41(C) of the Duty on Documents and Transfers Act and in 2 measures provided by Malta Enterprises with regards to transfer of ownership and support services.

Wednesday, 1 February 2017

The Malta Stock Exchange (MSE) has set up a Blockchain ThinkTank consisting of members of the Exchange’s Board, its Chairman and Chief Executive and outside experts. The latter will assist in the formulation of a strategy geared towards addressing blockchain as an emerging technology. Chairing the committee will be Dr. Abdalla Kablan, an MSE Director, entrepreneur and academic specializing in machine intelligence, big data, analytics and computational finance.

MSE's Chairman Mr. Joseph Portelli said “Malta and the MSE are quite fortunate to have at our disposal our country’s preeminent technologist and a globally recognized expert on blockchain technology. Dr. Kablan has a proven track record within the technology space, evidenced by his latest start-up Hippo Data, the first Maltese company to ever be selected into the London Microsoft Accelerator Program.” This program is an initiative that helps entrepreneurs grow their companies.

Malta Stock Exchange

Originally starting off as the platform on which the ‘much-debated’ currency of bitcoin was based, put simply, blockchain is merely a distributed ledger. It encompasses a method in which information is recorded and shared by an accepting community. Each member in the so called ‘chain’ maintains his or her own copy of the information and all members must validate any updates collectively. Each update is a new “block” added to the end of the “chain.” In other words, it can be summed up as a potentially very secure ledger of digital events, shared between all parties that choose to participate in the events. Parties’ identities and data are protected by cryptography and recordal of new ‘blocks’ or changes in events can only be updated after there is at least 51% or more participant consensus. With such entry of such information, erasing thereof is not possible, hence disintermediating the concept and doing away with a central, monitoring and certification authority.

The platform / protocol manages the manner in which new edits or entries are initiated, validated, recorded, and distributed. Blockchain is the ‘tech-charged’ equivalent of the public ledgers of the past, with the added value of permanence, transparency, searchability and the elimination of third party intermediaries. The inception of blockchain saw the replacement of the intermediary (the keepers of trust) with complex algorithms and technological verification methods. Blockchain can be used in all types of transactions, including those related to contracts, assets, liabilities, identities, or practically anything else that is usually publicly available but can be described in digital form. Entries are permanent, transparent, and searchable, which makes it possible for community members to view transaction histories in their entirety.

In the world of capital markets blockchain is now being used by the Scottish stock exchange and the Australian Stock Exchange. Reasons for its popularity include advantages of speed (allowing investors and brokers to receive their money only 15 minutes after a trade is executed) and reduced costs (blockchain could save the financial industry over 41 billion annually in back office costs).

The Malta Stock Exchange's creation of a specialised committee to assess this is definitely a positive move in the right direction and tallies perfectly with the Exchange's recent 23 point Strategic Plan that will focus on internationalisation and modernisation of the Exchange.

Friday, 30 December 2016

Shanghai Electric Power advances €250 million Investment

Chetcuti Cauchi,
advisor to Shanghai Electric Power (SEP), is pleased to announce that today the
transaction for the acquisition of 33% shareholding in Enemalta and a majority
stake in the BWSC plant has been concluded. Today SEP has advanced €250 million
to Enemalta as part of the deal. Through this transaction, SEP shares have also
been assigned.

Malta Largest Single Foreign Direct Investment

The transaction between the Chinese state-owned
corporation Shanghai Electric Power, the Maltese government and Enemalta has
constituted the Malta's largest
single foreign investment that Malta has ever experienced. SEP will
also invest €70 million in converting the BWSC plant from Heavy Fuel Oil to gas
and gasoil on June 2016.

Shanghai Electric Power concludes Enemalta Transaction

A government spokesman confirmed that “This means that
the contractual obligations and responsibilities under the energy sector and
investment cooperation agreement, signed on December 12, will come into force”.

This agreement will bring forth the establishment of two
joint venture companies that will focus on renewable energy and on the
maintenance of SEP's energy plants in the region. The Government said,
“Enemalta will thus be writing a new chapter in its history and will open new
horizons for our country”.

Chetcuti Cauchi Advocates is a full service commercial
law firm with a focus on corporate, administrative, tax, financial
services, banking, i-gaming and intellectual property law. The firm brings a
multi-disciplinary approach to problem solving and regularly advises businesses
looking to set up their operations in Malta or otherwise invest in the
jurisdiction. The firm acts as legal advisors to Shanghai Electric
Power and its Chinese legal counsel on various contractual and structural
aspects of the deal. The project gave rise to a number of complex legal
challenges and required a co-ordinated effort in bringing together the firm’s
various strands of expertise in corporate, administrative, property and
contract law. The deal represents an important milestone for the Maltese
economy, and the Chetcuti Cauchi team is very pleased to be part of this
landmark foreign direct investment into the Maltese economy.

The Firm's Energy & Resources Industry Group assists major
entities as well as start up companies in the gas, oil, utilities and power
industries in identifying opportunities in this ever-evolving industry. Our
professionals follow industry developments in the sector very closely, thus
they are strategically positioned to advise on international developments, and
opportunities as well as business issues. Drawing upon insight from our legal,
tax and corporate practices, we are able to assist investors from the very
inception of projects up till their completion, offering unrivalled level of
expertise all throughout. Whether it is applying for funding or securing
trading and planning permissions, our team offers holistic solutions enabling
clients to succeed in their endeavours. Whilst being a Malta Cyprus based firm,
we serve clients from all around the globe, and thanks to our international
connections in various jurisdictions, we have successfully engaged with
corresponding firms located in the client’s target jurisdiction.